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hello everyone I'm a bit sick so sorry for my voice but I guess it's good enough to make another video and today I wanted to talk about Canadian Pacific Railway and this company owns approximately 21 000 kilometers that is 13 000 miles of tracks in Canada and the United States and in December 2021 the Canadian rail operator completed its acquisition of Kansas City Saturn creating the first rail network that spans through Canada U.S and Mexico and just recently I made a video about Bill ackman's portfolio and he is growing his investment in Canadian Pacific Railway in a big way it is a growth of over 400 percent in the last quarter so let's try to see why did he decide to invest in this company and let's start with finding out who owns it apart from Bill Ackman individual Insiders that is an X individual insiders own only 0.02 percent of this company and we would like to see a number over two percent so that is very disappointing because we want the management to have their skin in the game and our individual insiders buying recently that is an X in the last 12 months more shares are being sold and bought by Insiders and the five Super investors own Canadian Pacific Railway and are they buying right now that is also a check in the last quarter they bought almost 12.3 million shares and sold just over 3 million shares okay so now let's take a closer look at the Financial Health of Canadian Pacific Railway return on invested Capital that is a check it is 12.1 and we like to see this number higher than 10 so that is really nice and free cash flow growth that is also a check it is 15 annual growth in the last 10 years so this is very good news because this number higher than 10 massive check they have a margin of 33.1 percent with a sector median around 6.8 percent so that is looking better and better and now uh let's take a look at shares buyback it is an X in the last 10 years they issued 7.7 extra shares and that is because of a massive shift at the beginning of this year the number of shares was going down through the years and at the first quarter of 2022 it jumped from around 683 million shares to around 933 million shares so they really needed a lot of cash to buy Kansas City Southern and that is probably the reason for issuing more shares but did they also had to get more debt yes they did it is an X it would take them almost 13 ant to see this number below two years and it did jump at the end of 2021 from 6.8 billion dollars to around 14.8 billion so they really had to get a lot of cash to close the deal with uh Kansas City Southern and before we look at the dividends I would be very grateful if you could press the like button because that tells YouTube that this video is not that bad and that way it helps to grow the channel okay back to dividends dividend yield that is a check it is 0.7 so Canadian Pacific Railway is paying 76 cents annually per every share and the payout ratio that is a check it is a 20 payout ratio and we want to see it somewhere between 20 and 50 so it is a nice part of earnings that is getting distributed to the shareholders but at the same time it is not so big to substantially slow the growth of the company though in this case uh we could Wonder wouldn't it be better to stop paying the dividends and pay back some of the debt which is huge okay and uh what about dividend growth it is a check five-year growth rate is around 12.6 percent so that is really nice and we will have to estimate the growth of Canadian Pacific Railway of this growth so in the low scenario we will estimate a growth of six percent for the first five years and then five percent in the medium nine percent and then eight percent and in the highest scenario 12 for the first five years and then ten percent scenario is around five dollars ten dollars in the medium one and fifteen dollars in the high one but we have to always add a margin of safety I use a 30 one and that makes me feel comfortable I know that my assumptions can be a little bit wrong and still I will not get into any serious trouble and with such a margin we get three dollars in the low one seven dollars in the medium one and over ten dollars in the highest scenario and the current price is around 75 dollars now as we can see the price is nowhere near our calculation of the intrinsic value and there are two reasons for that one is an incredible amount of debt that we have to take into consideration and the second reason is an exceptional jump in number of shares so basically if it wasn't for the cost of acquisition of Kansas City Southern this story would look completely different so we have a company that has an incredible profit margin that is growing and that has a potential to do very well in the future but this growth generated a lot of problems that and issuing shares and because of this acquisition the price just does not seem right but who knows maybe in the long term this acquisition will be looked at as a great move right now it does look a bit risky but let me know in the comments what do you think and remember that this analysis should be treated as just the first look at this company and you should always do your own due diligence before making any financial decisions that's all for today thank you very much for watching and I would really appreciate if you could press the like button and subscribe to the channel if you want to see more videos like this one thanks again and bye bye
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